The construction trades in many parts of the country are surging with activity. As demand grows, some have seen an opportunity to shift into self-employment to capitalise on better rates and the ability to choose work and working environments. If you're a tradesperson who has recently started their own business, consider the following tips to help get on the path to long-term business success.
1. Get financially literate. In the past I've seen much of the financial responsibility delegated to partners or a compliance-only focus on businesses finances.
You need to make sure you're making money from the work you're doing and that it's enough to cover costs such as insurance, tool replacements, travel, wages and your own time, as well as taxes and GST. Ensure you have cashflow and manage your deposits and debtor arrangements carefully.
2. Get corporate and form a company. People seem to respect and approach their business differently when they're a director in a company. Professionalism and pride will help you to get business. Companies also pay a lower rate of tax than the highest marginal rate for individuals.
Limited liability is an advantage and so is the ability to sell shares to other tradesmen (that is, if you have a strategy to do so and grow). Companies don't need to worry about withholding tax being paid on their behalf to the IRD for contracted services.
